Flavour of the week

Thursday, April 13, 2017

Fast-track go-getting

By Nicolás MeyerFor The Herald

If Calvin Coolidge could famously say that “the chief business of the American people is business” (he meant the US people), it isn’t too much of a stretch to state that “the chief business of the Argentine people is bureaucracy.”

Thus it is cause for celebration that the Argentine Senate the other day passed the Entrepreneurs’ Law (Ley de Emprendedores), which basically enables a commercial company to be set up in less than 24 hours, and to do everything over the Internet. Not only is this good because of the specific measures it contains despite some potential problems but especially for what it represents in terms of a change in mindset. And note, moreover, that this is a multipartisan measure it was adopted by the Senate by 57 votes in favour and not a single one against.

The bill had already been approved in general terms in the Lower Chamber by an overwhelming 189 votes to seven. It’s true that in the Senate itself, it had stalled in an earlier attempt in November, when half the senators voted against the proposal but this wasn’t because of opposition to the idea in itself. The sad reality is that, like almost everything in the world, it comes at some cost, at least initially, before the advantages kick in. The Entrepreneurs’ Law gives the new companies tax advantages, meaning less tax revenue at the outset, and sets up funds to give them financial help, and the issue that troubled the dissenting senators was whether the provinces they represent were shouldering that cost fairly. This concern had clearly been sorted out by the time of the more recent vote.

Fast-track action and flexibility are the names of the game under the bill. A new type of enterprise is created, the “simplified share-issuing company” (sociedad por acciones simplificada, or SAS), which, as said, can be up and running in a day, instead of several months. The work can be done on one’s computer, as can the opening of a bank account, the registration of signatures, the bookkeeping and more. The “more” includes the addition of shareholders and the expansion of the stated purpose of the company, as business develops, sometimes in unforeseen ways.

Nobody can guarantee that the new companies that are created under these easier rules will have a lower average rate of failure than the historical norm. Or even that the promised financial assistance will materialise as effortlessly as intended. But anything that so clearly tries to make it easier for people to become entrepreneurs, and, in so doing, to create wealth and jobs, must be welcomed.

Reading about the debates that attended the handling of a similar law in the Mexican Congress, two of the objections that were raised on that occasion stand out in especially high relief. One was that there is a risk that such an easy way to do business will be of help in money-laundering operations. The other is that if someone were to be involved in other kinds of questionable dealings, he too would find it simpler than before to set up a web of phantom companies that make it trickier for investigators to follow the trail.

These worries are not to be airily dismissed; the dangers are real, and could turn serious. I would, however, make two observations in this regard. The first is that, in general terms, one doesn’t impede developments that are very beneficial overall on the grounds that they may have some bad side-effects. There are exceptions to this; for instance, the insecticide DDT, which eliminated malaria in the southern US, has been dropped from use even though the disease continues to kill millions around the world, because of its toxicity to thousands. But cars, for instance, weren’t banned on the grounds that they would enable criminals to make fast getaways (though they may yet be banned on carbon-emission grounds). As said earlier, things usually come at a cost, and life is a permanent balancing of the pros and cons of diverse courses of action.

The other observation is that the lack of such simplified ways of doing business hasn’t, anyway, kept people from breaking the law in the past. So what is needed isn’t to continue to make it hard for everyone to do business, through endless paperwork, but to seek ways to combat the side perils that may come with progressive steps, particularly those with benefits so obvious that everyone across the political spectrum backs them.

I know who have real grounds for objecting to the Entrepreneurs’ Law: accountants, armies of which must currently be employed by business to navigate the red tape.